Modern slavery regime could finally get teeth under new Labor Government

The Labor party's published policy on modern slavery included a pledge to strengthen Australia's modern slavery regime. While the timing and form of any legislative amendment remains to be seen, it is likely the newly elected Labor government will proceed with its proposed changes, which include imposing penalties for non-compliance, appointing an Anti-Slavery Commissioner, requiring mandatory reporting on specified issues and imposing additional requirements on companies importing from high-risk countries.

What does the Modern Slavery Act currently require?

The Modern Slavery Act 2018 (Cth) (MSA) requires Australian entities and entities carrying on business in Australia with a consolidated revenue of at least $100 million, to prepare an annual Modern Slavery Statement. These Statements must address the mandatory criteria in section 16 of the MSA, including with respect to:

• the risks of modern slavery practices in the operations and supply chains of the reporting entity, and any entity that the reporting entity owns or controls;
• the actions taken by the reporting entity and any entity that the reporting entity owns or controls to assess and address those risks; and
• how the reporting entity assesses the effectiveness of such actions.

Statements must cover the entity's "reporting period" (typically their financial year) and must be submitted to the Minister for the Department of Home Affairs within six months after the end of the reporting period. Statements are made publicly available on the Modern Slavery Register. Reporting entities are likely to have just submitted or be in the process of finalising their second Statement.

How are Aussie modern slavery statements stacking up?

Literature published by academic and human rights groups is damning of the quality of Statements published to date. The report "Paper Promises? Evaluating the early impact of Australia's Modern Slavery Act", published in February 2022 as part of a collaborative research project by academics and civil society organisations, reviewed Statements from companies operating in or sourcing from certain high-risk sectors, concluding that "many company statements remain mere "paper promises" with little evidence of effective action". Specifically, the Paper Promises Report found that:

• 77% of companies failed to address all mandatory reporting criteria in their Statements;
• 52% did not identify obvious modern slavery risks in their operations and supply chains;
• 78% failed to consider how the COVID-19 pandemic affected their modern slavery risk profile by heightening production pressure, labour shortages and the vulnerability of workers in their supply chains; and
• only 25% of companies disclosed the location of their suppliers, with most failing to identify suppliers beyond the first tier of their supply chain.

The Paper Promises Report also named and shamed various companies for failing to demonstrate a genuine attempt to tackle modern slavery.

Furthermore, the International Justice Mission's "Spot Fires in Supply Chains" Report found that "almost all current actions taken by corporations reporting under the [MSA], particularly those who source from or operate in South Asian countries like India, are not substantively reducing their risk of – let alone protecting people from – modern slavery in their total value chains."

While the overall report card for modern slavery statements seems objectively bad, we are seeing many companies taking modern slavery very seriously in their ESG priorities and compliance frameworks. The MSA was based on the UK modern slavery laws, commonly criticised as a toothless tiger and broadly panned for being ineffective in genuinely tackling modern slavery due to high rates of non-compliance. Like the UK, we are seeing many companies aiming for bare minimum compliance, but an impressive minority are seeking to make modern slavery a point of difference in their ESG efforts, with a view to being both good corporate citizens as well as minimising the risk of adverse media publicity or customer outrage on an issue which is attracting greater attention in the community at large.

Labor's proposed measures

Appointment of an independent Anti-Slavery Commissioner

Labor plans to appoint an independent Anti-Slavery Commissioner and establish a corresponding office within the Attorney-General's Department. It is envisaged that the Commissioner will:

• monitor success in tackling modern slavery at the State and Commonwealth level; and
• work with the Australian Border Force, Australian Sanctions Office, AUSTRAC and international partners to increase outreach and information sharing.

Requirements for importers from high-risk locations

Notably, the Commissioner will also be responsible for publishing an annual list of countries, regions, industries and products with a high risk of modern slavery, with companies importing from these locations required to prove that the imported goods are not made with forced labour. This is a significantly higher bar than is currently imposed by the MSA, which requires reporting entities to describe the risks of modern slavery practices in their operations and supply chains but does not require reporting entities to certify that their operations and supply chains are "slavery free". Should this requirement be imposed, reporting entities will need to ensure they have proper and detailed oversight of their extended supply chains as well as robust due diligence and remediation mechanisms.

Penalties for non-compliance

Labor proposes to consult with business and advocacy groups on introducing penalties for non-compliance with the MSA. To date, the modern slavery regime in Australia has been all bark and no bite, with the threat of being "named and shamed" the only downside for non-compliance in the absence of any financial penalties. While penalties of up to $1.1 million were an early feature of the Modern Slavery Act 2018 (NSW), they were ultimately excluded from the NSW modern slavery legislation before it came into force on 1 January 2022. Noting the findings of the Paper Promises and Spot Fires in Supply Chains reports, and the experience in the UK, it is clear that reputational risks are not a sufficient motivation for some reporting entities to comply with modern slavery laws.

Mandatory reporting on specified issues

The Government also pledged to require mandatory reporting on "specified issues of pressing concern", such as Uyghur forced labour, again in consultation with relevant stakeholders. In this regard, we note that the Paper Promises Report found that companies sourcing textiles and clothing from China faced a high-risk of being linked to Uyghur forced labour; however, 75% of these companies failed to include in their statements mention of any risk of Uyghur forced labour in their supply chains.

Other proposals

The Government also proposes increasing the resources available to the Ambassador to Counter Modern Slavery, People Smuggling and Human Trafficking in the Department of Foreign Affairs and Trade in order to work with partners in the region to generate awareness of modern slavery. The Government will consider introducing targeted sanctions on foreign companies, officials and other entities known to be directly profiting from forced labour and other human rights abuses. Finally, Labor plans to undertake an audit of the Government's procurement procedures and supply chains and publish this on the Modern Slavery Register.